The Congressional Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending held hearings this week on proposed CAFE standards, as part of Chairman Darryl Issa’s investigation of the regulations. The first panel’s testimony can be seen in its entirety in the video above (all prepared testimony can be found in PDF format here), and it’s worth watching. Though the predictable D.C. partisanship certainly shows up, Anwyl’s testimony was the highlight the hearing, being a tough but fair analysis of the standards. Hit the jump for a brief roundup.

The panel in question had two clearly partisan witnesses: Marlo Lewis of the Competitive Enterprise Institute, and Roland Hwang of the Natural Resources Defense Council. But the contributions of both Edmunds CEO Jeremy Anwyl and Ohio-based independent trucker Scott Grenerth were authentic and revealing, despite being very different in content. While Grenerth provided a ground-level perspective on practical issues with new truck emissions regulation (which is not really our department here at TTAC), Anwyl provided the most germane testimony for students of the passenger car industry: a critique of the lack of consumer input in new standards.

His argument is not complicated, and his submitted testimony (along with graphs and commentary) can be found here. In his own words,

I have three points to make this morning.

The first is that — up until now — consumers have been either ignored or misrepresented.

The second is that consumers matter.

The third is that consumers are definitely not on board.

In support of his first point, Anwyl cites the EPA’s own presentations which list environmental groups, auto firms, technology suppliers, labor unions, governmental agencies and EV charging firms as “stakeholders,” without ever referring to consumers. He goes on to argue that

I know there have been polls showing consumers “want” higher mileage standards. These polls are worse than meaningless; they are grossly misleading. Instead of polls, we should first and foremost be guided by what consumers are actually doing; by actual purchases.

And, argues Anwyl, consumers are not buying cars for fuel efficiency. Using Edmunds.com market data and its proprietary market simulator (which looks to be fairly strong considering Edmunds’ strong record in our new Grade The Analysts feature), Anwyl shows that even among subcompact purchases, fuel economy maxes out as a 15% vehicle attribute weighting. In every segment, fuel economy is a less-important attribute than “brand.” Moreover, Anwyl points out that consumers expect a 12-month return on investment in fuel-saving options like hybrid drivetrains, when in fact they tend to run much longer than that (6-9 years for Camry, for example).

Anwyl sums up

I do have some good news: looking back, the auto industry seems to have delivered the impossible. They have added features, increased safety, elevated performance—and delivered increased fuel economy. Much of this during a period when CAFE standards were stable. I credit mostly the advance of technology and expect this progress to continue. But if mandates trigger an escalation of prices, a reduction in consumer utility or the adoption of technologies before they have been proven, consumers will react. We saw this play out before in the late Seventies and early Eighties when the domestic auto industry, torn between mandates for greater fuel efficiency and consumer demand for larger vehicles, introduced a generation of truly awful vehicles. The reputational damage from this era lingers today.

Push too far, too fast and we could easily destabilize an industry that is a vital engine of our collective prosperity.

35 Comments on “Anwyl: CAFE Proposals “Ignore Consumers” Who Are “Not On Board”...”

Anwyl’s analysis is very elegant, but ignores the obvious: consumers aren’t SUPPOSED to be part of the “regulatory process.” The fundamental premise of CAFE is that the government knows what’s better for “society” than society itself. Once you accept that premise, then Anwyl’s analysis becomes evidence FOR regulation, not against it: “These idiots are so stupid, they don’t know what’s good for them even when we hit them over the head with it. So, we have to save them from themselves by making these regulatory mandates.”

That said, one of the best points he made was to remind the assembled solons (some of whom may be too young to remember) as to what a disaster regulatory emissions mandates were for cars in the decade roughly between 1974 and 1984 when the technology (at a reasonable price) was not available to deliver the results mandated.

Of course, there is a subspecies of regulator/legislator who is all fine with that: it will just get people on bicycles, mass transit or whatever.

Hmmm… There are two reasons for being in the sub-compact market at all. Maybe three:

Price
Ease of parking
Fuel economy

There are a few weird people out there who probably simply like tiny cars for their own sake (my neighbor does) but mostly a subcompact is not a “destination” in and of itself. Nobody thinks 4 cramped seats and negligible cargo room are advantages.

Yet, fuel economy and even price are not big factors there?

This chart makes far more sense if its considered in light of “intenders” in a market segment. Having first decided to get a subcompact for reasons of fuel economy, price or ease of parking, then these factors come into play when determining WHICH subcompact to buy. 40mpg is favored, a little, over 38mpg, but not if the car is significantly more expensive.

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We’d probably all be better off, anyway, if Issa would stop working to tear down the Administration and gain political advantage and spend at least a little time figuring out what he could do with the Administration to get the country out of the recession.

The Edmunds CEO is a credible nonpartisan witness. His presentation has merits because it presents real world statistics and views not being presented by any other witness before this committee.

You may not like what he had to say because it conflicts with what you want to believe, but you have to acknowledge that your beliefs are not held by a majority of Americans. That said, it doesn’t change reality.

Mr. Anwyl’s testimony is a moment of clarity which needed to have been said.

As to the comment regarding Issa’s committee, it operates on the belief, based on economic facts, that overregulations are killing the economy. Americans spend billions upon billions attempting to figure out the regulations and meeting those regulations within their specific operations. That is billions being wasted. It is not for political purposes that this kind of committee is needed. Regardless of the politician in the Oval Office, it is vital for legislators to be made aware of the burdens they are placing on Americans when they continue pressing for regulations in every field of commerce.

Simply demanding a stop to the burdens being made on Americans by overregulations coming from Washington DC is a very good idea at this time. Eliminating overregulations will help us economically.

After blogging a bit about the Malaise Era automobiles, I have been thinking about how the lack of new technologies within the automobile industry had helped create the Malaisemobiles. At a time when it became popular to profit from reassembled auto parts originally engineered twenty years earlier, the success of the cars based on those reassemblies resulted in very bad cars.

The Car industry has engineers and reassemblers. A Corvair was engineered. A Mustang was reassembled. It is more profitable to reassemble than to engineer.

The Malaise Era profited from reassembling vehicles. Falcons became Mustangs, Pintos became Mustang IIs, Fairlanes became Thunderbirds, Chevy IIs became Sevilles, Chevelles became Cutlasses and a lot of money was made from the profitable options these cars became. Cars as late as the early 1980s were reassembled with parts engineered a generation earlier.

When the Japanese competition hit, Detroit was obsolete. It was making record profits, but it’s technology belonged on Edsels and DeSotos. During the 1980s, Detroit lost while attempting to reengineer itself into global competition. Every new Detroit product had to undergo ritual glitches while the Japanese churned out reliable vehicles.

So Anwyl is quite correct. The Malaise Era vehicles were the results of a negligent US auto manufacturing base fat with profits from obsolete car parts, and a Federal Government demanding a level of engineering not seen in Detroit since WWII. We ended up with four cylinder full size New Yorkers, GM engines that knocked and pinged whenever you asked them to budge out of neutral, and years of terrible cars that destroyed Detroit.

C’mon, there’s no magic to it. I want government to kill people in other countires and take their land and natural resources to keep gas a buck a gallon to so I can afford to drive a whompin’ truck and land yacht. I don’t care if they ever figure out 70mpg for those vehicles.

Of course consumers are not on board with higher fuel economy. If consumers were on board with higher fuel economy then government action would not be necessary.

If burning gasoline creates negative externalities (e.g. foreign oil dependence, global warming) then the best way to deal with that is higher gas taxes, not CAFE, but I can guarantee that consumers are not on board with that.

CAFE’s ultimate goal is to get consumers to change their buying behavior. Anwyl’s argument is basically that consumers are not on board, and by implication will not change, because they are not behaving that way today. Oh my!!

Anwyl’s conclusion:

“But if mandates trigger an escalation of prices, a reduction in consumer utility or the adoption of technologies before they have been proven, consumers will react. …

Push too far, too fast and we could easily destabilize an industry that is a vital engine of our collective prosperity.”

If regulations are designed to impact buying behavior and are wrong, can we say the same about political lobbying, advertising, and dealer incentives? The latter items are what got Detroit into it’s current mess, first ignoring imports, then failing to meet regulations the Japanese were able to accomplish with anywhere near the same level of quality and then relying on cheap to build SUVs to further kill their competitiveness when the market moved to $3-4 a gallon gas.

We consumers ARE thinking long term. We’ll all be dead in the long term and why should we pay more now or be inconvenienced by a compact car when we can live the good life cheaply and let the next guy live as he sees fit with the resources available to him at the time.

In my case I already drive a car that gets 30mpg mixed. What am I going to do to offset a gas tax? Buying a newer car with slightly better mixed milage isn’t the answer. The payment would be more than the increase in taxes. In a booming economy you could get away with a gas tax, but it wouldn’t have much effect as people would have more money to burn on gas and in a sagging economy people don’t have the money to buy a new car.

I love when people get libertarian about cars. Like private industry would have ever invested in roads to the extent that we have them. Only people that hate cars should hate government, there would be much lower rates of car ownership, and far fewer places to drive to without government intervention.

Hooray, a like-minded commenter!
Again, that charlatan global warming pines for the intercession of the self-selected elite.
Recall the sagacity of Dear Leader while in Senate training pants: his policy would cause electricity rates to “necessarily skyrocket”.
Genius! Alas, only to be constrained to the odd not so shovel ready project here, and Solyndra there.
Those Wascalwy Wepublicans!

This provides a nice example of how data can be willfully misused and abused in an effort to score some sort of point.

We know that a lot of consumers care about fuel economy because the bottom dropped out of the SUV market and the truck market has declined.

But once consumers decide to downsize by changing vehicle classes, fuel economy doesn’t play the dominant role in the specific vehicles that they choose because the figures between competitive models are about the same. At that point of the selection process, fuel economy isn’t the key differentiator.

we should first and foremost be guided by what consumers are actually doing; by actual purchases.

I agree. So why isn’t Edmunds following their own advice and doing just that?

because unlike yourself, Edmunds is smart enuff to realize the only reason the ‘bottom dropped out of the SUV market and the truck market has declined’ is due to higher gas prices, not because consumers care about fuel economy. And the only reason consumers appear to care about fuel economy now is because we are being forced to make every $$$ spent on a gallon of gas count for more because it now costs for more, and not just for our own car purchases, but also for the food and incidental purchases we have to make that are now even more expensive because of the higher fuel prices those business have to foist upon us because of their greater shipping/delivery budgets, etc.

Edmunds is smart enuff to realize the only reason the ‘bottom dropped out of the SUV market and the truck market has declined’ is due to higher gas prices, not because consumers care about fuel economy

In the future, you might try thinking prior to responding.

The specific reasons for the change don’t matter. If consumers change their driving and/or buying habits because of the price of fuel, then doesn’t change the fact that they are concerned enough about their fuel usage for it to impact their vehicle purchases.

The specific reasons for the change don’t matter. If consumers change their driving and/or buying habits because of the price of fuel, then doesn’t change the fact that they are concerned enough about their fuel usage for it to impact their vehicle purchases.

Of course it matters, it points out that people are more interested in fuel-efficient cars now because fuel is expensive, not because of whatever motivates those who write CAFE regulation.

You’re really goin to complain about a blog supposedly having Republican-leaning tendencies? One blog out of 1,000,000 pinko-liberal ones that make sure to carry at least one article every few weeks about how Republicans are anti-science, anti-environment, etc and you’re going to bitch? This is hardly the John Birch Society. Open your worldview up a little bit.

I liked the part at the end pointing-out how meeting new regulations made American cars from the 70’s to the 80’s so crappy, (granted Detroit has it’s own share of blame for letting themselves get caught technologically flat-footed). In the circles I’ve been chatting in the consensus is that in the US (compared to other Western nations) auto-industry regulation has reached unreasonable levels, not only in absolute standards but in arbitrarily favoring ‘sexy’ technologies (Like Hybrid Drive-trains) over more practical ones (Diesel for example).

I liked the part at the end pointing-out how meeting new regulations made American cars from the 70′s to the 80′s so crappy

I didn’t. It was a lame copout.

The revisionist history and faux-nostalgia in the car world is quite something. News alert: American cars weren’t all that great prior to the OPEC crisis and emissions standards, either.

The domestics were big on style and branding, but not particularly reliable or innovative. The improvements that we have today are due to foreign competitors raising the bar. Detroit has made some improvements because it had no choice.

I’m not arguing that American cars before then weren’t bad, I’m saying American cars after were Worse. :p

Cars are much, much better in all respects now, Technology in all areas has progressed very well now as well.

Could cars have improved by this much on their own without CAFE or Smog-Control or US Safety standards? Maybe, maybe not. But what happens to today’s Good cars when regulatory standards obsolesce them? Will the next cars be as good? Will the technology be available to Make them good? Will the regulations one day ask for something that’s just flat physically impossible?

The U.S. is (like it or not) a large country with low fuel prices, where its inhabitants have traditionally had the desire and ability to have larger vehicles than many places elsewhere.

Although I do not advocate artificially jacking up fuel prices, this would at least have the benefit of making consumers desire what the policymakers want to see in the auto market.

As it is, CAFE has pitted consumers against auto makers. The results are all around us. Consumers want big and powerful, the government wants small and efficient, and forces the manufacturers to offer the latter, even when there is no demand. How many crappy cars and parts have we endured because someone needed to engineer some more weight out of the car to eke out another 1/100th of a mpg for the tests?

Another round of CAFE hikes will give us a replay of the early 80s. Rabbits, Citations, Horizons, how much repair money did these cars cost their owners in exchange for some added gas mileage? Those of us old enough to have lived it the first time have no desire to go through this again.

A key reason I think why we have such crap regulation (in all aspects of American life, not just the automotive industry) is, unfortunately, the love affair much of America has politically with the ‘slippery slope’ argument. For example, on the one hand you have people who have no love for automobiles proposing we do something about the nasty stuff coming out of tail-pipes, on the other you have people who say, “No! You can have my Four-Barrel Carburetors and Dual-Exhausts when you pry them from my Cold Dead Hands!” because obviously writing laws to control smog is just hop, skip and a jump from writing laws banning cars.

And on the Third hand, you have people living in large cities who are kinda attached to this new thing the kids are doing called Breathing, and because the anti side is all ‘my way or the highway’ the pro side wins by default and we so we all get stuck with shoddy performance and lazy throttle-response instead of finding a healthy compromise.

Circumstances were dramatically different back then. Almost no attention had been paid to fuel economy before, so there was very little off-the-shelf technology to deploy to meet the standards, which had been rushed into effect in the face of a crisis.

The domestic manufacturers therefore had to rely mainly on simple downsizing, but there were problems with that too. They had limited experience with smaller cars and engines. Engineering good small cars is not simply a matter of shrinking the land yachts that were the mainstay of the domestic manufacturers at the time.

Ford and GM had extensive experience with small cars and engines in their European divisions, but those divisions operated in separate silos from U.S domestic operations. There was little cross-pollination.

I suspect there was also an attitude among the leaders that CAFE was just a temporary response to a crisis, which merited no long-term changes to their way of doing business. The companies reverted to their old ways once the crisis passed, and the CAFE standards stagnated for over two decades at levels that the domestic manufacturers had achieved from as early as 1988.

Consumers should have representation in the decision making process; however, consumers have shown themselves to underestimate long term cost over short term gain. They’re not infallible; neither is the market, which makes mistakes all the time and finds itself needing to readjust. It’s a feedback loop.

The primary role of the CAFE standards is to put everyone on a level playing field, or American manufacturers will once again find themselves unprepared, as they were in the 1970s, when fuel cost and availability suddenly change.

Mining is a one-time harvest. The world is littered with abandoned mining towns. Fossil fuels are limited in availability. They are finite. It’s better to prepare ahead, than to ignore reality, continuing to behave in customary ways. Without CAFE, manufacturers are at greater risk of misreading the market and jumping in too soon or too late, too little or too much, and being temporarily trounced by their competitors for their mistake, in the short run while being right in the long run.

Manufacturers now seem to understand this dynamic. I hear very little complaints coming from them. I think they now realize that CAFE is acting like an insurance policy to protect them from themselves.

Ease of parking? There are 12 attributes in the survey that Anwyl presented, nowhere do I see, “ease of parking”. I’m more likely to believe in the relevance of his data than your personal observations.